What the lawyers are not telling you about bankrupcy chapter 11...
Filing chapter 11 can be a difficult, confusing, and frustrating
process. The common belief that a business is lost after filing Chapter
11 is false. The difference between filing Chapter 11 and Chapter
7 exists between the way they solve the problem of debt. With Chapter
7 a company liquefies its assets and pays off debt, but with Chapter
11 the company keeps assets and reorganizes the debt in a more manageable
way. So, many companies bounce back after filing Chapter 11.
Can a business come back after filing Chapter 11? Sure. Any business
with the right goals and approach can come back from the depths of
debt. The process of chapter 11 provides a way to ease out of certain
debts and return to a profitable company. Chapter 11 involves the
courts. They view the company as having a certain path, if they stray
from that path, then they may lose their business, but if they stay
within its boundaries, then they will survive.
Filing Chapter 11 and What that Means Exactly
So you have heard the talks on television, in magazines, and papers
about the large companies filing Chapter 11 bankruptcy. They sometimes
survive and come back with a new name or a new approach to their
business. During the process of filing chapter 11 they have overcome
certain obstacles which we will describe.
Once filing chapter 11 a company enters the court system. The courts
can waive certain debts to relieve some of the financial distress.
These burdens can include long-term lease agreements, unsecured loans,
and union contracts. Once the court removes the financial roadblocks,
a company can negotiate with the creditors and agree on the amount
they will pay back and how they will do so. The business owner must
come up with the plan to rejuvenate their business. If they do not
provide a clear plan, then the creditors who are owed money can step
in and do so. The courts may grant the creditors plan over the business
owners, thus removing the business from the hands of the owner.
By knowing the laws, the ways to approach filing Chapter 11, a business
owner can succeed in turning around a failing business. It can breathe
new life into a company and help it back onto the road to success.
The courts want to keep companies from failing, as no one benefits
from a defunct business.
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